UKs franchising millionaires on the rise

Franchising has been around for as long as our modern economies, some trace it back to Antiquity and others to 200 B.C. China.

Whilst the ongoing debate surrounding the first franchiser in history is up for grabs, one irrefutable fact remains – the United Kingdom is where it all started.

The dawn of franchising emerged in feudal England when lords granted peasants rights to their lands in exchange for a fee and later, it was used in the provision of resources to the army in return for tax-collecting privileges. Commercial franchising as we know it today originated in 18th century London with the creation of ‘tied pub system’ – a downstream distribution system where tavern owners purchased all beer and ale products from the sponsoring breweries who, in turn, had no control over the day-to-day operations of the taverns. By 1830, more than half tavern-pub owners were tied to a commercial brewer, benefitting from subsidies and lower rents in exchange for the exclusive sale of the brewery’s products.

Franchising has come a long way since its feudal days, however, it still allows for companies to lighten set-up costs for store owners whilst franchisees benefit from the brand’s good name and support. With more than 8,000 Franchisee-owned outlets in the UK, recruitment has skyrocketed by 70% and franchises ‘contribution to the UK economy has seen a rise of 43%. According to the British Franchise Association, four in five new franchises are profitable within two years.

Successful and proven business models have allowed for brands like Domino’s, Starbucks, KFC and McDonald’s to spread like wildfire, becoming the model of choice for a budding number of overseas brands invading the UK market. Despite some of the challenges franchising may face with the digital age, all arrows point towards a profitable and very bright future.

In an interview for Raconteur.net, franchise director for HSBC, Martin Francis explains: “UK franchising is a very active market and franchisors are working hard to maintain their position. New brands are constantly entering the UK market so the competition is that much greater.

“There is still an interest in something different and novel in a crowded marketplace; if it is attractive, people will go for it. Established franchises cannot afford to be complacent and need to focus on developing their unique selling point or USP.”

Fast food franchise wheeler-dealers, like McDonalds and KFC, are ahead of the game offering everything from ‘new and improved’ recipes, better looking restaurants to exceptional customer services and interaction.

“Many of these franchisors are adopting digital technology to improve customer interaction with their brand beyond their restaurants,” says Francis. “They know that their customers can choose to dine out or order food to eat at home. By developing mobile apps and teaming up with delivery service providers, such as Just Eat and Deliveroo, they ensure that customers can still enjoy their products wherever they choose.”

Food and beverages is one of the biggest and fastest-growing sectors within franchising and an army of successful fast food franchise owners in the UK are heftily reaping what they sow.

An army of food and beverage franchising millionaires is steadily rising in the UK.

Successful franchiser Akram Kahn started out working in a KFC as a teenager and now at the age of 47 owns 14 KFC restaurants and plans on going for number 20 in no time. “When the opportunity to buy a franchise came up, I jumped at it. I like the structure of franchising – I haven’t got the confidence to open my own restaurant. This way, you have the autonomy of your own restaurant but you have access to expertise,” Kahn explains. In 2002, he acquired his first franchise and by 2006 he had already sold up and purchased nine other KFC restaurants. Kahn’s leap of faith paid off handsomely as the company he later set up to manage his business interests, Gastronomy Foods, is worth a whopping £15m. In 2016, it was at £12.6m with pre-tax profits of £440,000 most of which he reinjected in the business whilst venturing into the purchase of four Starbuck franchises. Another UK fast food franchise success story comes with Bristol-based Mike Guerin, who after 23 years of franchising, now operates 12 McDonald’s in the west of England. Despite the strict guidelines imposed by McDonald’s, franchisees are consulted about changes on the menu. This gives a health-conscious Guerin the freedom to serve fewer burger and chips, and more wraps and salads in his restaurants. Guerin’s company, Caspian Networks employs over 950 people and in 2016 had a turnover of £29m with pre-tax profits of £741,000. Guerin’s shares his outlook on a successful McDonald’s franchising career: “The early years can be tough for franchisees. You have to invest a huge chunk of money and end up in a large amount of debt. Then there’s the challenge of keeping both staff and customers happy. But McDonald’s is a very good business partner. They’re very aware of the pressures and not in the business of failing franchisees.”

A far cry from ‘get-rich-quick’ schemes, franchising business models are in for the long haul. According to the BFA, the underlying reason behind the successful food franchising business model is the alliance between restaurant companies with ambitious growth plans and committed individual owners who are willing to go the extra mile.

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